Principles of Taxation
Canons of Taxation
Canons of taxation were originally laid down by economist Adam Smith in his famouse book "The Wealth of Nations".
A good tax system is one which is designed on the basis of an appropriate set of principles (rules).
The four main canons of taxation as postilated by Adam Smith are
This states that a person should be taxed according to their ability to pay taxes.
The time of payment, the manner of payment and the amount to be paid should be clear to every tax payer and not arbitrary.
The mode and timings of tax payment should be convenient
to the tax payer. It means that the taxes should be imposed
in such a manner and at the time which is most convenient
for the tax payer.
Every tax has a cost of collection. The canon of economy implies that the cost of tax collection should be minimum.
With the passage of time more canons were developed to better
suite the changing industrial age. These additional five (5) canons are;